By Peter Nurse
Investing.com -- Oil prices climbed higher Friday helped by doubts about supply levels, but are still on course for substantial weekly losses on concerns over China's COVID-19 curbs and weakness in the global economy.
By 09:15 ET (13:15 GMT), U.S. crude futures traded 2.8% higher at $89.03 a barrel, while the Brent contract rose 2.7% to $94.86.
U.S. Gasoline RBOB Futures were up 3.3% at $2.4640 a gallon.
Helping the tone Friday was the impression that nuclear talks between Iran and the U.S. appear to have stalled, reducing the likelihood that the Persian Gulf country will resume exporting onto the global market anytime soon.
The potential for a deal has been a big downside risk for oil prices recently, as Iran could supply around one million barrels of crude a day, but White House National Security Council spokesperson Adrienne Watson earlier Friday called the Iranian response “not constructive”.
Traders are also looking forward to next week’s meeting of the Organization of the Petroleum Exporting Countries and allies, a group known as OPEC+, which is likely to include discussions over output cuts.
“The market is edging closer towards US$90/bbl and this creates a bit of uncertainty,” said analysts at ING, in a note. “In mid-August when the market traded down to these levels, the Saudi energy minister suggested the potential for OPEC+ supply cuts.”
“We expect the group to leave output targets unchanged. Their own numbers show a tighter-than-expected market. And they would probably also want some more clarity on Iranian supply before making any big changes to output policy,” ING added.
That said, the crude market is headed for a steep weekly decline, weighed by concerns over weakening global demand, China’s COVID-19 woes and the dollar's surge to a record high.
Tighter monetary policy in both Europe and the U.S. have spurred concern that energy consumption will weaken as the year progresses.
The European Central Bank is set to hike by at least 50 basis points next week, while the U.S. economy continued to create jobs at a solid pace in August as nonfarm payrolls rose by 315,000, suggesting another hefty Federal Reserve hike later this month.
Additionally, parts of the important tech hub of Shenzhen in China extended curbs on public activities on Friday, adding to the 21 million people in Chenghu which were put under lockdown on Thursday.
The dollar has also climbed to multi-year highs, including hitting the highest level against the yen in 24 years for a second day on Friday, making crude more expensive for overseas buyers.
Baker Hughes’ rig count and the CFTC’s positioning data round off the week later.